On September 30, Waldon Co. has $540,250 of accounts receivable. Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1. Prepare journal entries to record the following selected October transactions. The company uses the perpetual inventory system. a. Sold $305,000 of merchandise (that cost $178,500) to customers on credit.b. Received $395,100 cash in payment of accounts receivable.c. Wrote off $15,700 of uncollectible accounts receivable.d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet.
What will be an ideal response?
1.
| a. | ? | Accounts Receivable......................................................... | 305,000 | ? |
| ? | ? | Sales.............................................................................. | ? | 305,000 |
| ? | ? | Cost of goods sold............................................................. | 178,500 | ? |
| ? | ? | Merchandise Inventory................................................. | ? | 178,500 |
| b. | ? | Cash................................................................................... | 395,100 | ? |
| ? | ? | Accounts Receivable.................................................... | ? | 395,100 |
| c. | ? | Allowance for Doubtful Accounts.................................... | 15,700 | ? |
| ? | ? | Accounts Receivable.................................................... | ? | 15,700 |
| d. | ? | Bad Debts Expense *...................................................... | 19,328 | ? |
| ? | ? | Allowance for Doubtful Accounts................................ | ? | 19,328 |
Allowance for doubtful accounts before adjustment= $13,750 - $15,700 = $1,950 debit
Uncollectible = $434,450 * .04 = $17,378; $17,378 + $1,950 = $19,328 bad debt expense
2.
| Current assets | ? | ? |
| Accounts Receivable | $434,450 | ? |
| Less: Allowance for Doubtful Accounts | 17,378 | $417,072 |
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